Monday, January 20, 2014

IRS abuse of power, now and in MLK's day

The hubbub over the Internal Revenue Service's inept and ill-advised vetting process for groups seeking nonprofit status no longer dominates the news cycle.

But make no mistake, the issue has not disappeared. TaxProf blogger Paul Caron has been keeping a daily tally of coverage. We're now up to Day 256 in the so-called IRS scandal.

Fiscal costs to IRS: And there are more direct implications for the IRS other than just a public relations nightmare.

The recently enacted $1.1 trillion spending bill that keeps the federal government running through Sept. 30 includes provisions directly related to the IRS 501(c)(4) nonprofit status imbroglio and other missteps the agency has made in recent years.

Non-profit review overreach: In case you've forgotten, a Treasury Inspector General for Tax Administration examination last year found that the IRS inappropriately scrutinized conservative groups that applied for the special tax-exempt status.

"If you have the IRS operating in anything less than a neutral and nonpartisan way, then that is outrageous," Obama said. "It is contrary to our traditions."

IRS history of harassment: Uh, actually, Mr. President, while it's not the law of the land, it sadly is not contrary to our traditions.

In my lifetime, there has been pressure from as high as the White House to use the agency to keep seemingly insurgent sectors in control or at least on their heels.

President John F. Kennedy mobilized the IRS against the right-wing, fundamentalist Christian ministers who had been critical of his Catholicism. A decade later, President Richard Nixon wanted the IRS to investigate around 200 people who were on Nixon's famous "enemies list."

And on this Martin Luther King, Jr. Day, we can't overlook how tax laws were used in the 1950s to intimidate civil rights leaders.

Dr. King, several of his lawyers and members of the Southern Christian Leadership Council were audited repeatedly by the IRS. The major tax attack, however, came from the state of Alabama.

Alabama officials conducted two tax investigations into King's finances. In 1956, King settled charges against him for a deduction he was unable to document.

The second tax charge four years later was more serious. In 1960, King became the first person ever prosecuted by Alabama on criminal tax charges that he had signed fraudulent tax returns for 1956 and 1958.

King took the stand in his own defense, asserting that the state tax examiner had revealed that he was "under pressure by his supervisors" to find fault with the civil rights leader's returns. After nearly four hours of deliberations, the all-white jury returned a "not guilty" verdict.

King cited the verdict as "great hope" and as a revelation that "there are hundreds and thousands of people ... of goodwill" across the country. That's a message he carried forward as the civil rights movement continued to grow.

More legislation to restrict IRS actions: As our country's recent history in the Dr. King's case and other situations indicates, the IRS has been used for political purposes by both sides.

Sadly, that's not likely to happen.

Sure, the IRS might not be auditing folks for political purposes with as much impunity as it did 50-plus years. And you can be sure that the agency will be on eggshells when does anything for the foreseeable future.

But folks on Capitol Hill are still using the IRS to make political points.

H.R. 3865, if enacted, would prevent the Treasury Department and IRS from issuing or finalizing proposed regulations that Camp says would restrict the First Amendment rights of Code Sec. 501(c)(4) tax-exempt organizations.

OK, that's not a bad goal. As long as the IRS just follows the rules and makes sure that any group applying for this tax-favored status is primarily -- or, as the statute says, exclusively -- engaged in social welfare activities, it shouldn't matter to the IRS whether it's founded by right- or left-leaning folks.

IRS as political pawn: But Camp, like most of his Capitol Hill colleagues, can't leave well enough alone.

The chair of the House tax-writing committee says his bill is necessary to "stop the Obama administration from targeting groups that engage in civic debate," turning the political pandering rhetoric volume knob to 11.

Camp's bill would halt any new IRS 501(c)(4) rules for a year to ensure, says the chairman, that ongoing Congressional investigations into the full extent of IRS targeting of conservative groups are completed.

How convenient that the postponement time frame would get us past the 2014 mid-term elections, keeping the issue politically alive for Representatives and Senators facing tough campaigns.

Weekly Tax Tip

Back-to-school tax holidays are back -- It's a late summer perennial, states offering shoppers special days to buy tax-free clothing, computers and classroom supplies. This year 17, and maybe 18 soon, will hold the sales tax holiday weekends or longer. The events save families a few bucks if they follow all the rules. (July 29, 2015)

You also can get a refresher of the Daily Tax Tips posted earlier this year on their respective filing season monthly pages: January, February, March and April.

Sponsored Links

Counting Down to Tax Day

Did you get an extension on April 15to file your tax return?You are not alone.Our countdown clock will make sure that all of us still workingon our tax returns don't missthe Oct. 15 extended deadline.

Time for Tax Tasks

July 1: This is the day on which many states' new laws take effect. This year, gasoline taxes are getting a lot of attention. While federal lawmakers refuse to hike the excise tax that Uncle Sam collects on fuel, some state lawmakers are not nearly so reluctant. Seven states increased their gas and/or diesel excise taxes today. They are California, Georgia, Idaho, Maryland, Nebraska, Rhode Island and Vermont.

July 4: Happy 239th Birthday, America! Most of us will never be totally independent of taxes, but we can celebrate fewer tax hassles.

A tax professional can help you get your tax life in shape, whether it's taking steps to lower your 2015 bill or file that 2014 return that's due by the extended Oct. 15 deadline.

July 10: Do you get tips as part of your job? If so and you received gratuities totally $20 or more in June, use Form 4070 to report them today to your employer.

July 14: The 2015 Atlantic/Gulf of Mexico hurricane season has been relatively tame, with just two named storms (Ana and Bill) so far. But we can't get complacent. Hurricane season, being ticked off on the countdown clock below, can ramp up quickly and will officially continue through Nov. 30.

To prepare for a tropical storm's landfall or the associated rain, flooding and tornadoes that accompany them, check out the ol' blog's special Natural Disasters Resources page. It has physical and financial preparation tips.

July 17: Ah, summertime and the living is easy … as long as you have a great day camp where you can send your kids. Working parents can use the day camp's costs to help claim the child and dependent care credit.

July 21: For older youngsters, getting a summer job is a rite of passage. It's a great way for them to earn some spending money -- or sock away a bit for coming college costs --- and learn life-long financial responsibility lessons. They'll also get schooled on the role of taxes taken out of their paychecks.

July 24: In addition to putting some summer job earnings toward college savings, your young employee can start building a retirement nest egg by opening a Roth IRA.

July 31: Now that we're into the last half of 2015, it's a good time to make some midyear tax moves that can help reduce your coming tax bill, such as evaluating your portfolio for losing stocks that can offset any gains and making deductible donations to your favorite charity.

Advertisements

0, 1, 2, 3, 4, 5, 6, 7, 8, 9 ...

Taxes are all about the numbers. Check out these (mostly) weekly By the Numbers figures.

What are you looking for?

Looking for something in particular? Start with the Table of Contents. Or check out the Archives, where you can review posts by month and category. Or enter specific keywords in the box below to search Don't Mess With Taxes.

I gotta tell ya ...

AKA Disclaimer:

I am a professional journalist who has been covering tax issues since 1999. I am not a professional tax preparer. The content on Don't Mess With Taxes is my personal opinion based on my study and understanding of tax laws, policies and regulations. It’s provided for your private, noncommercial, educational and informational purposes only. It’s not a recommendation of any specific tax action(s) you should take. Similarly, mentions of products or services are not endorsements. In other words, my ramblings on the ol' blog are free advice and you know what they say about getting what you pay for. That's why when it comes to filing your taxes, I urge you to get additional, professional, paid-for guidance from an accountant, Enrolled Agent or other qualified tax professional who is familiar with your individual tax circumstances.

Note 1: Some of the links on this site are affiliate links. That means that if you click through from a Don't Mess With Taxes link and then buy the product, I receive a commission.

Note 2: Links to outside content might become inactive due to changes at the content's originating Web page. If you discover dead links, please e-mail me the details. Thanks.

Keep Uncle Sam cranky!

It's no wonder Uncle Sam is not very happy here. His vault is empty. Don't Mess With Taxes aims to keep him cranky by providing tax and personal finance tips and advice that will put more money in your bank account, not the government treasury.

DMWT Mobile

Don't Mess With Taxesis now optimized for readers on the go. You don't even need an app. Just type dontmesswithtaxes.com into your smartphone or other mobile device and it will load in a formatfor smaller browsers.